Cost Assessment and Methodologies in Generation Expansion Planning

This chapter defines and briefly discusses the types of costs associated with electric power‐generating plants and systems in generation expansion planning (GEP) and methodologies used for solving the GEP problems. Cost accounting practices and terminology vary from country to country and within countries. Two distinct figures of merit are important when discussing or comparing the economics of power generating technologies: capital investment costs, and power generation costs. In traditional generation planning, mathematical methodologies used are linear programming, non‐linear programming, dynamic programming, mix‐integer programming, and the Pontryagin's maximum principle. In the conventional method, the production costing model is based on the load duration curve. The generating units are loaded according to a merit order that reflects increasing operating costs per produced by using the convolution processes. It is well known that the computational effort and burden of most planning packages is primarily due to the numerical convolution processes involving the inverted load duration curve.